Delta Market Update - February 2017

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Written by Charles C. Smith, Jr., Chairman

Published: 24 February 2017

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A February Overview

The markets have continued their run from the end of 2016, and while we are richly valued, we feel there are economic reasons that justify the recent ascent. Compound the global economic rebound with the “deep breath” investors have now taken after the election, and it translates into a good environment for the markets. Some of the positives we are seeing are:

The latest data suggest that global trade growth picked up at the end of last year and business surveys suggest that it remained strong in January. Specifically, the global Purchasing Managers’ Index (PMI) suggests we could experience 3+% GDP growth this year.

Trade volumes rose in both advanced and emerging economies at the end of last year. The annual growth rate of exports from emerging economies improved in December. The improvement was evident even after smoothing out month-to-month volatility.

Sometimes it’s the “little” indicators that matter. Alternative measures are significantly more upbeat. For example, the number of containers passing through the world’s ports and the volume of air freight have both surged recently.

President Donald Trump seems to have toned down his protectionist talk, which puts other countries at ease. He has placed less emphasis on the punitive tariffs on imports from China and Mexico that he spoke of on the campaign trail.

The market has been on a great run and we certainly welcome the growth. That said, we are priced to perfection and starting to see a few cracks in the internals of the market. After such a big run, we would expect a normal correction in this time frame. There is a strong economic justification for our recent run and we believe any correction in this time frame would eventually give way to higher prices later in the year.

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